Rebecca Patterson Talks Warsh, FOMC Preview

The Fed meeting could be dramatic if the new chair changes things; he doesn't want to dawdle.

Host (Tom/Paul)

Rebecca Patterson

Priority one, two, and three this week is reinforce the Fed's credibility. You don't want any questions about any political bias.

If he does a press conference, that'll be his opportunity to lay out priorities: review economic models, processes, and communication. He's been vocal about less communication.

The president is pressuring for lower rates, but the data doesn't support it. The messaging this week is as much for the market as for the president.

Host (Tom/Paul)

Rebecca Patterson

Core PCE for May is tracking at around 3.3% year-on-year. There's no way they can cut rates anytime soon.

Even if the Strait of Hormuz opens and oil retreats, you still have a strong economy and inflation coming through the AI channel. Market pricing of a possible hike makes sense.

The dollar was expected to weaken this year, but the war with Iran caused a flight to quality. Now what?

Host (Tom/Paul)

Rebecca Patterson

The dollar was stronger against everything except commodity currencies, primarily on rate expectations from higher energy prices and inflation. Now yields and the dollar are down a bit.

The question is whether the Fed has a hawkish bias in the press conference. Rate expectations will be important for the dollar. The Bank of Japan is expected to hike, the ECB just raised rates, so it's not clear how much stronger the dollar gets.

If you end a war, you get a disinflationary tendency. But in a boom investment banking environment, do you just assume disinflation?

Host (Tom/Paul)

Rebecca Patterson

I wouldn't assume anything right now. The deal isn't signed till Friday, and it's not clear if it sticks or what the terms are. Iran wants funding and could still pressure for a service fee through the Strait.

Oil has come down, stocks are up. Does it last? If we have peace, Iran needs money to rebuild, the US doesn't want oil at $40 or 30-year yields at 5% going into midterms.

Gold has pulled back from near $5,000 to around $4,300.

Host (Tom/Paul)

Rebecca Patterson

You had a lot of speculative money go into gold at the beginning of the year, a parabolic move. Two big central banks, Russia and Turkey, were selling. But central banks in general are continuing to buy.

The single mis-call on New York City was the 2020 census where everyone thought the MSA added 600,000. It's a bet against New York that's always been there.

Host (Amry Hordon)

Rebecca Patterson

There is a human emotion to go after whoever's on top. But New York's back: people are working 5 days a week, real estate prices are coming back, the city is packed.

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